Jacob Saulwick

It was Tuesday on the last designated sitting week of 2009, the day Malcolm Turnbull's leadership was made terminal by an extraordinary backbench revolt. Turnbull's dispute was raging on the ground floor of Parliament House. Two floors above, and out of the glare, a gentler ensemble was gathering for the evening.

The social policy committee of Labor's caucus had invited Clubs Australia, the premier lobby for the multibillion-dollar industry, to address members and senators in one of parliament's private dining rooms. The chairman of Clubs NSW, Peter Newell, was the speaker, and the dinner was peppered with managers and workers from sporting, workers and Labor clubs, primarily from NSW and Queensland.

''All efforts will be made to seat members and senators with club representatives from their local communities,'' the invitation sent to parliamentarians said.

''Well over 100 club directors, volunteers and even club members travelled to Canberra because they wanted our politicians to hear directly from the community about their club and what was at risk of being lost,'' the chief executive of Clubs Australia, David Costello said.

An assistant NSW secretary of the powerful Liquor, Hospitality and Miscellaneous Union, Tara Moriarty, also attended.

Clubland was ratcheting up its lobbying. A month before, pubs, clubs and casinos had been shocked by a draft Productivity Commission report that recommended sweeping changes to the regulation of poker machines. The report called on governments to cut maximum bets to $1, to prevent gamblers punting anything heavier than $20 notes, and to introduce systems allowing gamblers to cap their losses.

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About 15 per cent of poker machine players were problem gamblers, the report found, and they accounted for 40 per cent of all spending.

Yesterday the commission handed in its final report, yet it could be as late as June before it is made public: the government does not have to release the report for 25 sitting days. If the commission sticks to its draft recommendations, and the Herald understands it is likely to hold close to them, Clubs Australia predicts the measures would result in a conservative 30 per cent drop in revenue. That would mean $2 billion and 11,500 jobs gone in NSW alone, clubs say.

Before the last election Kevin Rudd created an impression he would do something about the level of problem gambling in Australia. ''I hate poker machines and I know something of their impact on families,'' Rudd said, in comments that have since been much quoted. But if Rudd does actually want to do something, reforms will not come easy. The government would need to cross a powerful and emotive political constituency, tear at the heart of state government revenue, and enter into a sphere of regulation of which it has historically been shy.

Perhaps the most glaring difficulty in tackling poker machines is their importance to state coffers. Australians spend about $18 billion a year on gambling, and almost a third of that flows to state revenue.

The former treasurer Peter Costello commissioned a similar report in 1998, and the commission believes little has changed in the past decade.

In 2007-08 the states collected about $3 billion from poker machines, and $4.9 million from all forms of gambling, according to the most recent Bureau of Statistics figures. Taxes on poker machines made up 5.6 per cent of all revenue, and gambling taxes in general came to 9.1 per cent.

The NSW government pulls in about $1 billion from poker machines, and $1.6 billion from all forms of gambling. It is not clear how the federal government would go about lowering that figure.

John Williams, a law professor at the University of Adelaide, says the Howard government's High Court victory needed to implement Work Choices paves the way for federal intervention into pubs and clubs through its corporations powers.

''Since the Work Choices decision you can regulate the employees of a corporation, you can regulate how they trade, the hours they trade,'' says Professor Williams.

In addition, Professor Williams says, the government could manipulate it taxing powers to curb gambling, or try to link Commonwealth payments to states in such a way that would discourage them bringing in their own gambling revenue.

The Henry tax review has also looked into gambling, but is understood to have shied away from recommending so-called sin taxes to stem problem gambling. The economics runs like this: higher taxes on ''sins'' such as cigarettes, for instance, reduce demand for them. Higher gambling taxes, however, will not necessarily lead to less money being pushed through machines.

''This is not an easy issue,'' says one federal ALP member. ''It is great to make statements, but how do you implement these things?

''It is not defence or foreign affairs, it is not health or education. We don't have jurisdiction on big aspects of this. Why would the Rudd government take on Anna Bligh's government about this issue?''

On this line of thinking, the only way for the federal government to influence state-based gaming laws would be by cajoling the states through the Council of Australian Governments process. It would be an optimistic minister who would predict rapid progress along these lines.

There is, however, a mood within government to do something about poker machines. But that mood would also need to be strong enough to overcome the cultural and political ties that link the ALP with clubs and pubs, particularly in an election year.

''The problem is that the Labor Party in particular, and especially in NSW, its fortunes are inextricably tied up with the clubs,'' says Charles Livingstone, lecturer in health social sciences at Monash University.

The November dinner, for instance, was convened by the Queensland MP Shayne Neumann, who chairs the caucus social policy committee. Neumann was asked by his old friend, the former treasurer of the Queensland Labor Party and current lobbyist for Clubs Australia, Damien Power, to organise the dinner. Neumann, like much of caucus, expresses strong concern about the incidence of problem gambling. But these concerns are always weighed against the need to maintain the viability of clubs. ''Clubs penetrate all areas of community life,'' says Neumann.

This week, a South Australian Labor member, Nick Champion, made a rare contribution in Parliament recommending the commission's draft proposals. The speech stood out because Champion talked about the need to tackle problem gambling without also referring to the importance of pubs and clubs. ''I hope to see a positive response from the government,'' Champion said of the draft recommendations.

Tim Costello, who with Senator Nick Xenophon, has placed himself at the head of the anti-pokies movement, remains similarly hopeful: ''It is difficult but we have all given up on the states. They can't, they won't, they are addicted. Only a prime minister who hates pokies can now take gambling off the table as a major issue.'' '